Russia, Saudi Arabia agree to freeze oil output to prevent price drop

The world's two largest oil producers

Russia and three members of the Organization of Petroleum Exporting Countries (OPEC) - Saudi Arabia, Venezuela and Qatar - agreed to freeze oil production at January's level if other producers do the same, Russian Energy Minister Alexander Novak said in a statement.

Oil prices last month plummeted to their lowest point in years - below 30 dollars a barrel - in a rout that has wreaked havoc on oil-dependent economies, including Russia and Venezuela. As recently as two years ago, prices per barrel were above 100 dollars.

The deal is "an effort to prevent the oil price from sliding below 30 dollars per barrel while Russia and OPEC are waiting for their main prize: a steep fall in US shale production," said Chris Weafer, a senior partner at Russian-focused investment consultancy Macro Advisory.

"Critically, the agreement does not include Iran. An expected increase in Iranian production is, along with still high US shale output, the big concern for the oil market," Weafer told dpa.

Artem Konchin, senior oil analyst at Otkritie, Russia's largest independent financial group by assets, said that on Wednesday there will be a meeting with Iran and Iraq to discuss the same approach.

The deal was reached by the four countries' energy ministers during a meeting in the Qatari capital, Doha, according to the statement on the Russian Energy Ministry's website.

Qatari Energy Minister Mohammad bin Saleh al-Sada confirmed that a deal to freeze oil output had been made, according to broadcaster Al Arabiya.

"The reaction in the market was somewhat muted, as the market hoped for a cut - rather than a freeze - of output," said Konchin.

Konchin agreed that the deal's upside is that it could prevent oil prices from tumbling further.

"For Russia, this will help to avoid a larger-than-forecast budget deficit and keep inflation on a downward year-on-year trajectory," he told dpa.

Weafer predicted that the news will raise prices in the short term, "but it does nothing to address the basic problem. The oil market is currently oversupplied by up to 1.5 million barrels per day."

Russia and Saudi Arabia are currently producing oil at near record high levels, so freezing output means nothing because it is doubtful that they could produce much more, Weafer said.

Last month, Russia's former finance minister, Alexei Kudrin, predicted that oil prices could fall as low as 16 dollars without intervention.

Last update: Tue, 16/02/2016 - 17:07
Author: 

More from World

Reports: Wife of Orlando gay nightclub shooter arrested in California

The wife of the man who killed 49 people in a gay nightclub in Florida in June has been arrested, according to news...

Five killed in shooting in Mexico after music festival

A shooting early Monday at a Mexican beach disco where people had gathered at the end of a music festival killed...

Four Turkish police officers killed by blast in south-east

A blast killed four Turkish police officers in the south-eastern city of Diyarbakir on Monday, the state-run Anadolu...

Trump's 'obsolete' NATO comments rattle EU foreign ministers

US president-elect Donald Trump's criticism of NATO has been met with "concern" by the military alliance's top...

Burundi to withdraw AU troops from Somalia over salaries unpaid by EU

Burundi will withdraw its 5,400 troops serving as part of an African Union contingent in Somalia because the...